Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc., 596 U.S. ___ (2022)

Docket No. 20-1641
Granted: November 5, 2021
Argued: March 1, 2022
Decided: June 21, 2022
Justia Summary

The employer-sponsored group health plan offers all of its participants the same limited coverage for outpatient dialysis. A dialysis provider sued the plan, citing the Medicare Secondary Payer statute, which makes Medicare a “secondary” payer to an individual’s existing insurance plan for certain medical services, including dialysis, when that plan already covers the same services, 42 U.S.C. 1395y(b)(1)(C), (2), (4). To prevent plans from circumventing their primary-payer obligation for end-stage renal disease treatment, a plan may not differentiate in the benefits it provides between individuals having end-stage renal disease and other individuals based on the existence of end-stage renal disease, the need for renal dialysis, “or in any other manner” and may not take into account that an individual is entitled to or eligible for Medicare due to end-stage renal disease. The Sixth Circuit ruled that the limited payments for dialysis treatment had a disparate impact on individuals with end-stage renal disease.


Annotation
Primary Holding

The Medicare Secondary Payer statute does not authorize disparate-impact liability; a benefits plan that offers all of its participants the same limited coverage for outpatient dialysis does not violate the statute.


Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

MARIETTA MEMORIAL HOSPITAL EMPLOYEE HEALTH BENEFIT PLAN et al. v. DaVITA INC. et al.

certiorari to the united states court of appeals for the sixth circuit

No. 20–1641. Argued March 1, 2022—Decided June 21, 2022


Opinions
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

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No. 20–1641

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MARIETTA MEMORIAL HOSPITAL EMPLOYEE HEALTH BENEFIT PLAN, et al., PETITIONERS v. DaVITA INC., et al.

on writ of certiorari to the united states court of appeals for the sixth circuit

[June 21, 2022]

Justice Kavanaugh delivered the opinion of the Court.

The question in this case is whether a group health plan that provides limited benefits for outpatient dialysis—but does so uniformly for all plan participants—violates the Medicare Secondary Payer statute. We agree with petitioner Marietta and the United States as amicus curiae that the answer is no. We therefore reverse the judgment of the U. S. Court of Appeals for the Sixth Circuit and remand the case for further proceedings consistent with this opinion.

I

A

Medicare provides health insurance coverage for those who are 65 or over, or are disabled. In 1972, Congress extended Medicare coverage to individuals with end-stage renal disease, regardless of age or disability. See Social Security Amendments of 1972, §299I, 86Stat. 1463; 42 U. S. C. §426–1. That benefit now covers hundreds of thousands of Americans with end-stage renal disease. In the aggregate, the costs of healthcare for individuals with end-stage renal disease are high, and Medicare spends about $50 billion annually on treatments for those individuals.

During the initial years of the Medicare program after its enactment in 1965, Medicare acted as the first payer for many medical services, regardless of whether a Medicare beneficiary was also covered under another insurance plan, such as an employer-sponsored group health plan. In 1980 and 1981, in part due to rising Medicare costs, Congress enacted and amended the Medicare Secondary Payer statute. That statute as amended makes Medicare a “secondary” payer to an individual’s existing insurance plan for certain medical services, including dialysis, when that plan already covers the same services. See Medicare and Medicaid Amendments of 1980, §953, 94Stat. 2647; Medicare and Medicaid Amendments of 1981, §2146, 95Stat. 800; 42 U. S. C. §§1395y(b)(1)(C), (2), (4).

Given the significant costs of healthcare for those with end-stage renal disease, Congress recognized that a plan might try to circumvent the statute’s primary-payer obligation by denying or reducing coverage for an individual who has end-stage renal disease, thereby forcing Medicare to incur more of those costs. To prevent such circumvention, the statute imposed two specific constraints on group health plans. First, a plan “may not differentiate in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner.” §1395y(b)(1)(C)(ii). Second, as relevant here, a plan “may not take into account that an individual is entitled to or eligible for” Medicare due to end-stage renal disease. §1395y(b)(1)(C)(i); see §426−1.

B

DaVita is one of the two major dialysis providers in the United States. DaVita provides dialysis to hundreds of thousands of individuals each year, including individuals insured by their employers’ group health plans.

The Marietta Memorial Hospital Employee Health Benefit Plan is an employer-sponsored group health plan. The Plan offers the same terms of coverage for outpatient dialysis to all of its participants. But under the Plan, outpatient dialysis services are subject to relatively limited reimbursement rates.

In 2018, DaVita sued the Plan, arguing that the Plan’s limited coverage for outpatient dialysis both (i) differentiates between individuals with and without end-stage renal disease and (ii) takes into account the Medicare eligibility of individuals with end-stage renal disease in violation of the Medicare Secondary Payer statute. §1395y(b)(1)(C).

The District Court dismissed DaVita’s claims, concluding that the Plan does not violate the anti-differentiation or take-into-account provisions of the Medicare Secondary Payer statute because the Plan’s terms, including its terms for outpatient dialysis treatments, apply uniformly to all Plan participants.

A divided panel of the U. S. Court of Appeals for the Sixth Circuit reversed. See 978 F.3d 326 (2020). Among other things, the Court of Appeals ruled that the statute authorized disparate-impact liability, and the Court concluded that the limited payments for dialysis treatment had a disparate impact on individuals with end-stage renal disease.

Judge Eric Murphy dissented in relevant part. He reasoned that the Plan’s terms do not violate the statute because the Plan “offers the same benefits to all participants.” Id., at 358 (opinion concurring in judgment in part and dissenting in part).

The Sixth Circuit’s interpretation of the Medicare Secondary Payer statute departed from the holdings of district courts that had considered the question. See DaVita, Inc. v. Amy’s Kitchen, Inc., 379 F. Supp. 3d 960 (ND Cal. 2019); Dialysis of Des Moines, LLC v. Smithfield Foods Healthcare Plan, 2019 WL 8892581 (ED Va., Aug. 5, 2019); National Renal Alliance, LLC v. Blue Cross & Blue Shield of Georgia, Inc., 598 F. Supp. 2d 1344 (ND Ga. 2009). Moreover, several weeks after the Sixth Circuit’s decision, the Ninth Circuit agreed with Judge Murphy’s dissent and largely rejected the Sixth Circuit’s analysis. See DaVita Inc. v. Amy’s Kitchen, Inc., 981 F.3d 664 (2020).

This Court granted certiorari to resolve the disagreement between the Courts of Appeals. 595 U. S. ___ (2021).

II

A

We first consider DaVita’s differentiation argument. To reiterate, the relevant statutory provision states: A plan “may not differentiate in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner.” 42 U. S. C. §1395y(b)(1)(C)(ii).

That statutory language prohibits a plan from differentiating in benefits between individuals with and without end-stage renal disease. For example, a group health plan may not single out plan participants with end-stage renal disease by imposing higher deductibles on them, or by covering fewer services for them. See 42 CFR §§411.161(b)(2)(i)–(iv). If a plan does not differentiate in the benefits provided to individuals with and without end-stage renal disease, then a plan has not violated that statutory provision, and the differentiation inquiry ends there.[1]

The Marietta Plan provides the same benefits, including the same outpatient dialysis benefits, to individuals with and without end-stage renal disease. Indeed, DaVita does not dispute that the Plan’s terms apply uniformly to all Plan participants. Therefore, the Plan does not “differentiate in the benefits it provides between individuals” with and without end-stage renal disease. 42 U. S. C. §1395y(b)(1)(C)(ii).

In response, DaVita primarily argues that the statute authorizes liability even when a plan limits benefits in a uniform way if the limitation on benefits has a disparate impact on individuals with end-stage renal disease.

To begin with, the text of the statute cannot be read to encompass a disparate-impact theory. That text requires inquiry into whether a plan provides different benefits to (i) those with end-stage renal disease and (ii) those without end-stage renal disease. The text does not ask about “the effects of non-differentiating plan terms that treat all individuals equally.” 978 F. 3d, at 363 (opinion of Murphy, J.); see also Amy’s Kitchen, 981 F. 3d, at 674−675. In light of that plain text, it comes as no surprise that the Centers for Medicare and Medicaid Services have never adopted a disparate-impact theory in their longstanding regulations implementing this statute.

The disparate-impact theory not only is atextual but also would be all but impossible to fairly implement. The premise of the disparate-impact theory is that the plan’s benefits for outpatient dialysis are inadequate. But what level of benefits would be adequate, and how would courts determine the level of benefits that qualifies as adequate?

Neither the statute nor DaVita offers a basis for determining when coverage for outpatient dialysis could be considered inadequate. And neither the statute nor DaVita supplies an objective benchmark or comparator against which to measure a plan’s coverage for outpatient dialysis.

Absent some benchmark or comparator, courts would have great difficulty trying to make an apples-to- apples comparison of a plan’s coverage for outpatient dialysis against its coverage for other services. Group health plans cover services for many different health issues at varied rates. Those rates may reflect negotiations with third parties, the needs of a particular plan’s beneficiaries, and other factors such as geography. Courts would be entirely at sea in trying to determine an appropriate benchmark or comparator for outpatient dialysis. Put simply, DaVita’s approach is a prescription for judicial and administrative chaos, and further demonstrates that DaVita’s disparate-impact theory is not a correct interpretation of the statute.[2]

DaVita’s position would ultimately require group health plans to maintain some (undefined) minimum level of benefits for outpatient dialysis. But this statutory provision simply coordinates payments between group health plans and Medicare. As the Government itself acknowledges, the statute does not dictate any particular level of dialysis coverage by a group health plan. See Brief for United States as Amicus Curiae 13. If Congress wanted to mandate that group health plans provide particular benefits, or to require that group health plans ensure parity between different kinds of benefits, Congress knew how to write such a law. It did not do so in this statute. To the extent that Congress wants to create such a system going forward, Congress of course may do so.

In sum, the Marietta Plan does not “differentiate in the benefits it provides” to those with end-stage renal disease and those without end-stage renal disease.

B

DaVita also contends that a plan that provides limited coverage for outpatient dialysis impermissibly “take[s] into account” the Medicare eligibility of plan participants with end-stage renal disease in violation of the statute. To reiterate, that statutory provision states that a plan “may not take into account that an individual is entitled to or eligible for” Medicare. 42 U. S. C. §1395y(b)(1)(C)(i); see also §426–1. For example, a plan may not terminate coverage, limit coverage, or charge higher premiums for an individual who has Medicare coverage due to end-stage renal disease. See 42 CFR §§411.108(a)(3), (5)−(6).

As already discussed, the Marietta Plan’s terms, including its terms of coverage for outpatient dialysis, are uniform for all individuals. Because the Plan provides the same outpatient dialysis benefits to all Plan participants, whether or not a participant is entitled to or eligible for Medicare, the Plan cannot be said to “take into account” whether its participants are entitled to or eligible for Medicare.

*  *  *

Because the Marietta Plan’s terms as relevant here apply uniformly to all covered individuals, the Plan does not “differentiate in the benefits it provides” to individuals with end-stage renal disease or “take into account” whether an individual is entitled to or eligible for Medicare. We therefore reverse the judgment of the U. S. Court of Appeals for the Sixth Circuit and remand the case for further proceedings consistent with this opinion.

It is so ordered.

Notes
1  If and only if a plan differentiates in benefits between those with and those without end-stage renal disease, the next question would be whether the plan differentiates “on the basis of ” (i) the existence of the disease, (ii) the need for renal dialysis, or (iii) in any other manner. 42 U. S. C. §1395y(b)(1)(C)(ii). Those three circumstances, especially the somewhat ungrammatically phrased catchall “in any other manner,” appear to cover the waterfront of possible bases on which a plan might differentiate in the benefits provided to those with end-stage renal disease. In other words, if there is differentiation, the differentiation is likely on an impermissible basis. Therefore, the only meaningful question under this statutory provision appears to be whether the plan differentiates in benefits between those with and those without end-stage renal disease.
2  DaVita’s related proxy theory—that singling out outpatient dialysis is simply a proxy for singling out individuals with end-stage renal disease because those individuals disproportionately receive outpatient dialysis—likewise finds no support in the statutory text. The statute requires that a plan provide the same dialysis benefits regardless of whether an individual has end-stage renal disease. If a plan provides the same benefits to all individuals, the plan does not “differentiate in the benefits it provides” to individuals with and without end-stage renal disease. §1395y(b)(1)(C)(ii) (emphasis added). This statute is a coordination-of-benefits statute, not a traditional antidiscrimination statute.
SUPREME COURT OF THE UNITED STATES

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No. 20–1641

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MARIETTA MEMORIAL HOSPITAL EMPLOYEE HEALTH BENEFIT PLAN, et al., PETITIONERS v. DaVITA INC., et al.

on writ of certiorari to the united states court of appeals for the sixth circuit

[June 21, 2022]

Justice Kagan, with whom Justice Sotomayor joins, dissenting in part.

Today the Court crafts for the Medicare Secondary Payer Act (MSPA) a massive and inexplicable workaround. The MSPA instructs that a group health plan “may not differentiate in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner.” 42 U. S. C. §1395y(b)(1)(C)(ii). The majority holds that the plan here does not so “differentiate” because it draws distinctions only between dialysis and other treatments—not between individuals with end stage renal disease and individuals without it. See ante, at 6, n. 2. That conclusion flies in the face of both common sense and the statutory text.[1]*

One fact is key to understanding this case: Outpatient dialysis is an almost perfect proxy for end stage renal disease. Virtually everyone with end stage renal disease—and hardly anyone else—undergoes outpatient dialysis. Ninety-seven percent of people diagnosed with end stage renal disease—all those who do not obtain a preemptive kidney transplant—undergo dialysis. See National Institutes of Health, United States Renal Data System, 2021 Ann. Data Rep.: End Stage Renal Disease, ch. 1, figure 1.2, https://adr.usrds.org/2021/end-stage-renal-disease. And 99.5% of DaVita’s outpatient dialysis patients have or develop end stage renal disease. See Brief for Respondents 6.

Because that is so, common sense suggests that we should not care whether a health plan differentiates in benefits by targeting people with end stage renal disease, or instead by targeting the use of dialysis. When “status and conduct” are proxies for each other, “[o]ur decisions have declined to distinguish” between them. Christian Legal Soc. Chapter of Univ. of Cal., Hastings College of Law v. Martinez, 561 U.S. 661, 689 (2010). So, for example, we have explained that a penalty for “homosexual conduct” is a penalty for “homosexual persons.” Lawrence v. Texas, 539 U.S. 558, 575 (2003). And likewise, a “tax on wearing yarmulkes is a tax on Jews.” Bray v. Alexandria Women’s Health Clinic, 506 U.S. 263, 270 (1993). The same goes here: A reimbursement limit for outpatient dialysis is in reality a reimbursement limit for people with end stage renal disease. And so a plan singling out dialysis for disfavored coverage “differentiate[s] in the benefits it provides between individuals having end stage renal disease and other individuals.” §1395y(b)(1)(C)(ii). That is so even if, as petitioner Marietta notes, dialysis is also a treatment for some miniscule number of people with acute kidney injury. See Reply Brief 13. That a proxy is only 99.5% (not 100%) accurate should make no difference. A tax on yarmulkes remains a tax on Jews, even if friends of other faiths might occasionally don one at a Bar Mitzvah.

And if common sense were not enough, statutory text would come to the rescue. Congress was well aware of the relationship between end stage renal disease and dialysis—and the text it wrote reflects that knowledge. The statute proscribes not just differentiation “on the basis of the existence of end stage renal disease,” but also “on the basis of . . . the need for renal dialysis, or in any other manner.” §1395y(b)(1)(C)(ii). The back half of that provision prevents exactly the circumvention the majority today allows. It bars plans from differentiating between people with and without end stage renal disease even when that differentiation is accomplished indirectly—by targeting their treatment, or by relying on some other proxy for the condition. So contra the majority, the statutory text does indeed prohibit differentiation as to services—and not only as to individuals. See ante, at 6, n. 2.

That reading also fits with the statute’s purpose. As the majority recognizes, the MSPA’s renal disease provisions were designed to prevent plans from foisting the cost of dialysis onto Medicare. See ante, at 2. Yet the Court now tells plans they can do just that, so long as they target dialysis, rather than the patients who rely on it, for disfavored coverage. Congress would not—and did not—craft a statute permitting such a maneuver. Now Congress will have to fix a statute this Court has broken. I respectfully dissent.

Notes
1 *Like the majority, I am unpersuaded by DaVita’s arguments concerning disparate-impact liability and the MSPA’s separate take-into-account clause. See ante, at 5, 7. But I part ways with the majority as to DaVita’s “proxy” theory (which the majority relegates to a footnote). See ante, at 6, n. 2.

Materials
Jul 25, 2022 JUDGMENT ISSUED
Jun 21, 2022 Judgment REVERSED and case REMANDED. Kavanaugh, J., delivered the opinion of the Court, in which Roberts, C. J., and Thomas, Breyer, Alito, Gorsuch, and Barrett, JJ., joined. Kagan, J., filed an opinion dissenting in part, in which Sotomayor, J., joined.
Mar 1, 2022 Argued. For petitioners: John J. Kulewicz, Columbus, Ohio. For United States, as amicus curiae: Matthew Guarnieri, Assistant to the Solicitor General, Department of Justice, Washington, D. C. For respondents: Seth P. Waxman, Washington, D. C.
Feb 18, 2022 Reply of petitioners Marietta Memorial Hospital Employee Health Benefit Plan, et al. filed. (Distributed)
Feb 18, 2022 Reply of Marietta Memorial Hospital Employee Health Benefit Plan, et al. submitted.
Feb 18, 2022 Motion of the Solicitor General for leave to participate in oral argument as amicus curiae, for divided argument, and for enlargement of time for oral argument GRANTED.
Feb 2, 2022 Letter to Clerk re disclaimer of Davita Inc., et al. submitted.
Feb 2, 2022 Letter of respondents to Clerk regarding disclaimer filed.
Jan 28, 2022 Corrected Proof of Service of National Association for the Advancement of Colored People submitted.
Jan 28, 2022 Corrected proof of service with respect to vrief amicus curiae of National Association for the Advancement of Colored People filed.
Jan 26, 2022 Amicus brief of Kidney Care Council and Renal Healthcare Association submitted.
Jan 26, 2022 Amicus brief of National Association for the Advancement of Colored People submitted.
Jan 26, 2022 Amicus brief of Congressman William Thomas submitted.
Jan 26, 2022 Amicus brief of Thomas A. Scully submitted.
Jan 26, 2022 Amicus brief of Kidney Care Partners submitted.
Jan 26, 2022 Amicus brief of Dialysis Patient Citizens submitted.
Jan 26, 2022 Brief amicus curiae of National Association for the Advancement of Colored People filed. (Distributed)
Jan 26, 2022 Brief amici curiae of Kidney Care Council and Renal Healthcare Association filed. (Distributed)
Jan 26, 2022 Brief amicus curiae of Congressman William Thomas filed. (Distributed)
Jan 26, 2022 Brief amicus curiae of Dialysis Patient Citizens filed. (Distributed)
Jan 26, 2022 Brief amicus curiae of Kidney Care Partners filed. (Distributed)
Jan 26, 2022 Brief amicus curiae of Thomas A. Scully filed. (Distributed)
Jan 24, 2022 Motion of United States for leave to participate in oral argument and for divided argument submitted.
Jan 24, 2022 Motion of the Solicitor General for leave to participate in oral argument as amicus curiae, for divided argument, and for enlargement of time for oral argument filed.
Jan 19, 2022 Brief of Davita Inc., et al. submitted.
Jan 19, 2022 Brief of respondents Davita Inc., et al. filed. (Distributed)
Jan 18, 2022 CIRCULATED
Dec 27, 2021 The record received from the U.S.C.A. 6th Circuit has been electronically filed.
Dec 23, 2021 Amicus brief of Self-Insurance Institute of America, Inc. submitted.
Dec 23, 2021 Brief amicus curiae of United States filed.
Dec 23, 2021 Amicus brief of United States submitted.
Dec 23, 2021 Brief amicus curiae of Self-Insurance Institute of America, Inc. filed.
Dec 22, 2021 Brief amici curiae of Pacific Health Coalition, et al. filed.
Dec 22, 2021 Amicus brief of Pacific Health Coalition submitted.
Dec 21, 2021 Record requested from the U.S.C.A. 6th Circuit.
Dec 20, 2021 Joint Appendix submitted.
Dec 20, 2021 Brief of Marietta Memorial Hospital Employee Health Benefit Plan, et al. submitted.
Dec 20, 2021 Brief of petitioners Marietta Memorial Hospital Employee Health Benefit Plan, et al. filed.
Dec 20, 2021 Joint appendix filed. (Statement of costs filed)
Dec 17, 2021 ARGUMENT SET FOR Tuesday, March 1, 2022.
Nov 5, 2021 Petition GRANTED.
Nov 1, 2021 DISTRIBUTED for Conference of 11/5/2021.
Oct 6, 2021 DISTRIBUTED for Conference of 10/29/2021.
Oct 4, 2021 Reply of petitioners Marietta Memorial Hospital Employee Health Benefit Plan, et al. filed. (Distributed)
Sep 20, 2021 Brief of respondents Davita Inc., et al. in opposition filed.
Aug 6, 2021 Motion to extend the time to file a response is granted and the time is extended to and including September 20, 2021.
Aug 5, 2021 Motion to extend the time to file a response from August 20, 2021 to September 20, 2021, submitted to The Clerk.
Jul 21, 2021 Response Requested. (Due August 20, 2021)
Jun 30, 2021 DISTRIBUTED for Conference of 9/27/2021.
Jun 24, 2021 Waiver of right of respondent Davita Inc., et al. to respond filed.
May 21, 2021 Petition for a writ of certiorari filed. (Response due June 24, 2021)